PROSPECTUS SUPPLEMENT DATED JANUARY 7, 1999
SPECIAL FEATURES OF THE KPMG PLAN
As described more fully in the accompanying May 1, 1998 prospectus
("Prospectus") for Prudential's Group Variable Universal Life ("GVUL") Contract,
the particular features of each group contract issued by Prudential may vary.
This is a supplement to the Prospectus that describes the unique features of the
GVUL Contract that Prudential ("we" or "us") has issued to KPMG ("KPMG
Contract"). Many of the defined terms that are used in this supplement are
defined in the Prospectus. Retain this supplement with the Prospectus and, if
you elect coverage, your GVUL certificate.
ELIGIBILITY AND ENROLLMENT
WHO IS ELIGIBLE FOR COVERAGE?
All regular full-time active partners of KPMG and Subsidiaries or one of its
affiliated companies may enroll for coverage as well as former partners who
retire on or after 4/1/1999. Former partners who terminate employment after
4/1/1999 and elect to continue coverage through the portability provision are
also eligible. We also include as eligible any KPMG partner who retired before
4/1/1999 but actively participated in the Cash Accumulation Account under the
Group Flex Life Program on 3/31/1998 and elected to convert to the GVUL plan
effective 4/1/1999.
COVERAGE INFORMATION
HOW MUCH COVERAGE MAY AN ELIGIBLE PARTNER OBTAIN?
You will be automatically covered for 6 times your annual earnings (less
incentive compensation), rounded to the nearest $100,000, up to a maximum of
$2,500,000. You may elect to limit the maximum amount of coverage in excess of
$1,500,000 to as little as $1,500,000, although any such amount must be rounded
to the nearest $100,000.
You may elect to enroll for a Supplemental amount of coverage as follows:
$ 500,000
1,000,000
1,500,000
We require evidence of insurability for all amounts of Supplemental coverage.
HOW MUCH COVERAGE MAY AN ELIGIBLE DEPENDENT OBTAIN?
Dependents are not covered under the KPMG GVUL Contract.
WHEN IS EVIDENCE OF INSURABILITY REQUIRED?
FOR CURRENT PARTNERS: If you choose to apply for Supplemental coverage, you will
have to furnish evidence of insurability. In addition, if you elect to limit
your coverage to an amount less than 6 times your annual earnings (excluding
incentive compensation) and you subsequently wish to increase your coverage for
any amount up to your allowable limit, you will need to furnish satisfactory
evidence of insurability for the requested increased amount of coverage.
ARE INCREASES IN COVERAGE AVAILABLE?
We may increase your coverage amounts (excluding Supplemental coverage) on each
October 1st based on your annual earnings (less incentive compensation). We do
not require evidence of insurability for these increases.
In addition, you may also apply for Supplemental coverage, but those requests
will be subject to evidence of insurability.
<PAGE>
WILL MY COVERAGE AMOUNT EVER DECREASE?
Your coverage amount will decrease only if you voluntarily elect to reduce your
maximum amount of coverage in excess of $1,500,000 to any amount down to
$1,500,000 rounded to the nearest $100,000. However, should you decrease
coverage and later seek additional coverage, we will require evidence of
insurability. For information on possible tax implications, see page 41 of the
Prospectus. In addition, you should consult your own financial or tax advisor on
such issues.
WILL MY INSURANCE COVERAGE LAPSE IF MY
SELECTED INVESTMENT OPTIONS PERFORM POORLY?
We will keep the insurance in force as long as the balance in the Certificate
Fund is sufficient to pay the monthly charges under the Certificate. If the
balance in the Certificate Fund is not sufficient to pay the monthly charges,
and you fail to make premium payments sufficient to bring the balance above this
minimum amount during the grace period, your insurance may lapse.
IS THERE AN ACCELERATED DEATH BENEFIT PROVISION?
Yes, the KPMG Contract includes an accelerated death benefit provision called
the Living Benefit Option, if you are diagnosed with a terminal illness and have
a life expectancy of 6 months or less. Under this provision, you can elect to
accelerate up to 50% of the Death Benefit, subject to a maximum of $250,000.
AM I ENTITLED TO ADDITIONAL BENEFITS?
Yes, you are eligible for the Accelerated Death Benefit, described above, and
you are eligible for the Extended Death Protection During Total Disability
described later in this prospectus supplement.
ARE THERE ANY EXCLUSIONS, LIMITATIONS OR COVERAGE AMOUNT REDUCTIONS ON MY PLAN?
There are no exclusions or limitations in the KMPG Contract. Your coverage
amount will decrease only if you voluntarily elect to reduce your maximum amount
of coverage in excess of $1,500,000 to any amount down to $1,500,000 rounded to
the nearest $100,000. However, should you decrease coverage and later seek
additional coverage, we will require evidence of insurability. For information
on possible tax implications, see page 41 of the Prospectus. In addition, you
should consult your own financial or tax advisor on such issues.
DEATH BENEFIT
HOW IS THE GVUL DEATH BENEFIT CALCULATED?
Your GVUL Death Benefit under the KPMG Contract is your Face Amount of coverage
plus the value of your invested Certificate Fund (minus any loan, loan interest
and outstanding charges, if applicable) as of the date of your death. You can
find more detail in the "Death Benefits" section of the Prospectus. The Death
Benefit will in some cases exceed this amount in order to satisfy the "cash
value accumulation test" [corridor percentage] of the Internal Revenue Code.
Consult the Prospectus, page 31, for further details.
HOW IS THE DEATH BENEFIT PAID?
Under the KPMG Contract, we pay the benefit in a lump sum or by deposit in the
Alliance Account (described on pages 31 and 32 of the Prospectus), an interest
bearing account upon which the beneficiary can write drafts. The Alliance
Account gives you access to additional settlement options from which you may
choose.
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<PAGE>
LOANS AND WITHDRAWALS
WHAT ARE THE TERMS OF A PARTICIPANT LOAN?
AMOUNT AVAILABLE FOR BORROWING: You may borrow from a minimum of $200 to a
maximum of 90% of the value of your Certificate Fund (investment options) less
any existing loans, accrued interest, outstanding charges, and the next month's
charges. If you take a loan, you may borrow money from the Certificate Fund
either in proportion to the fund balances at the time the loan is taken or you
may take a loan from specific investment options at amounts you request.
INTEREST RATE: The net cost of the loan is equal to an annual rate of 2%. For
further details, including details concerning loan repayment, consult page 37 of
the Prospectus.
WHAT ARE THE TERMS OF A PARTIAL CASH WITHDRAWAL?
You may make a partial withdrawal from a minimum of $200 up to a maximum amount
that would reduce the Certificate Fund (less any existing loans, accrued
interest, and outstanding charges) to an amount equal to the next month's
charges. We will not permit any partial withdrawal greater than that amount
because it would cause the Certificate to default. If you make a partial
withdrawal, you may withdraw the money from the Certificate Fund either in
proportion to the fund balances at the time the withdrawal is made or you may
make a withdrawal from specific investment options at amounts you request.
PREMIUMS
HOW ARE PREMIUMS PAID?
KPMG will remit regular premiums to Prudential on a monthly basis. Additionally,
KPMG will remit partner-elected lump sum premium deposits to Prudential in July
and November of each year. We will bill directly retirees, partners on an
approved leave of absence, and partners who elect portability. As such, they are
responsible for remitting their premiums to Prudential.
HOW MUCH MONEY CAN I CONTRIBUTE TO MY INVESTMENT OPTIONS?
You can select any dollar amount you wish to contribute subject to annual and
lifetime limitations set by the Internal Revenue Service. For further details
and tax implications, see page 41 of the Prospectus.
MAY I MAKE ADDITIONAL PREMIUM PAYMENTS?
In addition to regularly scheduled premium payments, you may make lump sum
premium payments at any time. The minimum lump sum premium payment is $100,
subject to annual and lifetime limitations set by the Internal Revenue Service.
For further details and tax implications, see page 41 of the Prospectus.
INVESTMENT OPTIONS
WHAT INVESTMENT OPTIONS ARE AVAILABLE?
The KPMG Contract has the following investment options:
Prudential Money Market Portfolio
Prudential High Yield Bond Portfolio
Prudential Stock Index Portfolio
Prudential Jennison Portfolio
Prudential Small Capitalization Stock Portfolio
Prudential Global Portfolio
MFS Bond Series
T. Rowe Price Equity Income Portfolio
T. Rowe Price New America Growth Portfolio
Neuberger & Berman AMT Partners Portfolio
Janus Aspen Worldwide Growth Portfolio
Warburg Pincus Global Fixed Income Portfolio
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We describe the investment objectives of these portfolios in the accompanying
Prospectus, which also describes their fees and expenses. Please refer to your
Enrollment Kit for further information on the funds' past performance. You may
also allocate funds to a Fixed Account, which earns interest at a rate
determined annually but guaranteed not to be less than 4%. As discussed on page
30 of the Prospectus, during the first 10 days following the Certificate Date,
we will direct your premium payments to the Fixed Account.
CHANGES IN COVERAGE STATUS
WHAT HAPPENS IF I BECOME DISABLED?
If you become totally disabled prior to age 60 and are unable to pay additional
premiums, you will continue to have insurance coverage equal to the Face Amount
of your Certificate until you reach 60 years of age or you no longer are totally
disabled.
CAN I CONTINUE COVERAGE WHEN I RETIRE?
You may continue your GVUL coverage when you retire. Your rates for coverage
will follow the rate schedule for KPMG active partners. We will bill you for
premium payments plus a direct bill charge of $3 per bill. Your Supplemental
coverage ends at termination of employment but may be converted to an individual
policy.
CAN I CONTINUE COVERAGE IF I LEAVE THE COMPANY FOR REASONS OTHER THAN
RETIREMENT?
You may continue coverage if you leave KPMG for any reason. We refer to this as
portability. Your rates for portability coverage will be step rated based on the
Plan's experience until the second policy anniversary after you leave the
employment of KPMG. After that, you will be charged rates for coverage based on
the experience of a Prudential portability pool. These rates will be higher than
your active rates. We will bill you for premium payments plus a direct bill
charge of $3 per bill. Your Supplemental coverage ends at termination.
Supplemental coverage may be converted to an individual policy.
WHEN DOES COVERAGE END?
At age 100, your GVUL coverage ends, and you will have the options described in
the section of the Prospectus entitled "ISSUANCE OF A CERTIFICATE", page 28.
WHAT HAPPENS IF THE GROUP CONTRACT IS TERMINATED?
Either KPMG or Prudential may terminate the Group Contract, although Prudential
will only do so under certain limited conditions described in the Prospectus on
page 39. If the Contract is terminated, KPMG may replace it with another life
insurance contract that, like the GVUL contract, permits you to accumulate cash
value. In that case, you will have the option of (i) transferring the value of
your investment options less any loans, accrued interest, and outstanding
charges to the new contract; or (ii) receiving that same amount in a lump sum
payment.
If KPMG does not replace the GVUL contract with a life insurance contract that
permits you to accumulate cash value, then you will have the option of
converting to a cash value individual life insurance policy, electing a paid-up
life insurance policy in which no future premiums would be paid, or receiving a
lump sum payment as previously described. For additional details, see the
Prospectus, page 39.
CHARGES AND EXPENSES
WHAT ARE THE CHARGES?
The current charges under the KPMG Contract are as follows:
1) FRONT-END CHARGES. We deduct a charge of 1.92% from each premium payment.
This charge compensates Prudential for incurring state and local premium
taxes (currently 1.57%) and for the impact of the federal deferred
acquisition cost tax (currently, .35%).
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<PAGE>
2) DAILY CHARGE AGAINST SUBACCOUNT ASSETS. We deduct a daily charge from the
assets of the Subaccounts to compensate for assuming mortality and expense
risks. For the KPMG Contract, the current daily charge for mortality and
expense risks is equivalent to an effective annual rate of .45%. We
guarantee that the total mortality and expense risk charge will not exceed
0.90%. In addition, each of the underlying mutual funds deducts investment
management fees and expenses, as described in the Prospectus for the
particular fund.
3) MONTHLY CHARGES. We deduct a monthly charge for the cost of insurance from
the value of your investment options. We describe the calculation of this
charge on page 34 of the Prospectus.
4) IF APPLICABLE. Each Certificate Year, you may make up to 12 transfers among
investment options without a transaction charge. After the 12th transfer in
each Certificate Year, you will be charged a transaction fee of $20 per
transfer. In addition, while you will receive a statement detailing activity
under your Certificate on a quarterly basis, such reports can be requested
at any time for an additional fee.
(5) HYPOTHETICAL ILLUSTRATIONS OF DEATH BENEFITS AND CASH SURRENDER VALUES. The
Prospectus contains two hypothetical illustrations of how the GVUL contract
works. See HYPOTHETICAL ILLUSTRATIONS OF DEATH BENEFITS AND CASH SURRENDER
VALUES, beginning on page 4. Because those illustrations are based on
generic GVUL charges and investment portfolios, (instead of the charges
negotiated for, and the funds selected by the KPMG Contract), the following
two illustrations have been prepared to illustrate how the KPMG Contract
works. The assumptions used in the following illustrations are as stated on
pages T1 and T2 of the Prospectus, except that the first illustration uses
the KPMG Contract's current charges, the second uses the KPMG Contract's
maximum charges. Both assume that the Certificate Fund has been invested in
equal amounts in each of the 12 variable funds available with the KPMG
Contract and that an annual premium of $5000 was paid at issuance plus
current cost of insurance and expenses were paid for all years.
Upon request, Prudential will provide you with comparable hypothetical
illustrations for a Certificate based on the funds you are interested in and
the premium payments you plan to make.
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<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATIONS
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
SPECIFIED FACE AMOUNT: $1,000,000
ISSUE AGE 40
ASSUME ANNUAL CONTRIBUTION OF $5,000 PLUS CURRENT COST OF INSURANCE AND CURRENT EXPENSES FOR ALL YEARS
USING CURRENT EXPENSE CHARGES AND CURRENT UNISMOKER COST OF INSURANCE CHARGES
Death Benefit(1) Cash Surrender Value(1)
------------------------------------------ ------------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Annual Investment Return of Annual Investment Return of
End of Premiums ------------------------------------------ ------------------------------------------
Certificate Accumulated 0% Gross 4.5% Gross 9% Gross 0% Gross 4.5% Gross 9% Gross
Year at 4% per year (-1.17%) Net (3.33% Net) (7.83% Net) (-1.17%) Net (3.33% Net) (7.83% Net)
- ----------- -------------- ------------ ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,030 $1,004,843 $1,005,100 $1,005,357 $ 4,843 $ 5,100 $ 5,357
2 14,341 1,009,629 1,010,369 1,011,133 9,629 10,369 11,133
3 21,944 1,014,359 1,015,814 1,017,361 14,359 15,814 17,361
4 29,852 1,019,034 1,021,440 1,024,078 19,034 21,440 24,078
5 38,075 1,023,654 1,027,253 1,031,320 23,654 27,253 31,320
6 46,628 1,028,220 1,033,260 1,039,129 28,220 33,260 39,129
7 55,523 1,032,733 1,039,467 1,047,549 32,733 39,467 47,549
8 64,774 1,037,193 1,045,881 1,056,629 37,193 45,881 56,629
9 74,394 1,041,600 1,052,508 1,066,420 41,600 52,508 66,420
10 84,400 1,045,956 1,059,356 1,076,977 45,956 59,356 76,977
15 140,761 1,066,984 1,097,173 1,143,537 66,984 97,173 143,537
20 209,332 1,086,810 1,141,719 1,240,568 86,810 141,719 240,568
25 292,760 1,105,503 1,194,194 1,382,020 105,503 194,194 382,020
30 394,262 1,123,128 1,256,006 1,588,228 123,128 256,006 588,228
35 517,756 1,139,746 1,328,819 1,888,838 139,746 328,819 888,838
40 668,005 1,155,414 1,414,591 2,327,069 155,414 414,591 1,327,069
<FN>
(1) Assumes no loan or partial withdrawal has been made.
</FN>
</TABLE>
The illustrated Face Amount includes only Base and Excess Coverage. The
illustrated Face Amount does not include any Suplemental Coverage.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, FEDERAL AND
STATE INCOME TAXES, AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER
VALUE FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATE
OF RETURN AVERAGED 0%, 4.5%, AND 9% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE YEARS. NO
REPRESENTATIONS CAN BE MADE BY PRUDENTIAL OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER ANY PERIOD OF TIME.
6
<PAGE>
<TABLE>
<CAPTION>
ILLUSTRATIONS
GROUP VARIABLE UNIVERSAL LIFE INSURANCE CERTIFICATE
SPECIFIED FACE AMOUNT: $1,000,000
ISSUE AGE 40
ASSUME ANNUAL CONTRIBUTION OF $5,000 PLUS CURRENT COST OF INSURANCE AND CURRENT EXPENSES FOR ALL YEARS
USING MAXIMUM CONTRACTUAL CHARGES
Death Benefit(1) Cash Surrender Value(1)
------------------------------------------- ----------------------------------------
Assuming Hypothetical Gross (and Net) Assuming Hypothetical Gross (and Net)
Annual Investment Return of Annual Investment Return of
End of Premiums ------------------------------------------- ----------------------------------------
Certificate Accumulated 0% Gross 4.5% Gross 9% Gross 0% Gross 4.5% Gross 9% Gross
Year at 4% per year (-1.62%) Net (2.88% Net) (7.38% Net) (-1.62%)Net (2.88% Net) (7.38% Net)
- ----------- -------------- ------------ ------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1 $ 7,030 $1,001,537 $1,001,708 $1,001,880 $1,537 $1,708 $1,880
2 14,341 1,002,647 1,003,053 1,003,479 2,647 3,053 3,479
3 21,944 1,003,308 1,003,996 1,004,743 3,308 3,996 4,743
4 29,852 1,003,490 1,004,486 1,005,609 3,490 4,486 5,609
5 38,075 1,003,164 1,004,473 1,006,009 3,164 4,473 6,009
6 46,628 1,002,301 1,003,903 1,005,870 2,301 3,903 5,870
7 55,523 1,000,879 1,002,730 1,005,120 879 2,730 5,120
8 64,774 0 (2) 1,000,900 1,003,675 0 (2) 900 3,675
9 74,394 0 0 (2) 1,001,431 0 0 (2) 1,431
10 84,400 0 0 0 (2) 0 0 0 (2)
15 140,761 0 0 0 0 0 0
20 209,332 0 0 0 0 0 0
25 292,760 0 0 0 0 0 0
30 394,262 0 0 0 0 0 0
35 517,756 0 0 0 0 0 0
40 668,005 0 0 0 0 0 0
<FN>
(1) Assumes no loan or partial withdrawal has been made.
(2) Based on the interest rate and charges illustrated, the premiums paid are
insufficient to keep the certificate in force. The certificate would lapse
under this scenario
</FN>
</TABLE>
The illustrated Face Amount includes only Base and Excess Coverage. The
illustrated Face Amount does not include any Suplemental Coverage.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, FEDERAL AND
STATE INCOME TAXES, AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER
VALUE FOR A CERTIFICATE WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATE
OF RETURN AVERAGED 0%, 4.5%, AND 9% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CERTIFICATE YEARS. NO
REPRESENTATIONS CAN BE MADE BY PRUDENTIAL OR THE FUNDS THAT THESE HYPOTHETICAL
RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR OVER ANY PERIOD OF TIME.
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<PAGE>
WHEN ARE CHARGES DEDUCTED?
We calculate and deduct the charges monthly from your Certificate Fund,
depending upon whether you generally pay premiums to KPMG or directly to
Prudential. We deduct these charges pro-rata from each Subaccount and the Fixed
Account.
We generally will deduct the monthly Certificate Fund charges once per month on
the Monthly Deduction Day. The Monthly Deduction Day will coincide with the day
that we credit premium payments we receive from KPMG. We anticipate that the
Monthly Deduction Day will fall around the beginning of each month, with the
exact dates dependent upon when KPMG forwards the payment. If KPMG has not
transferred the premium payments by the 45th day following the first day of a
particular month, however, we will deduct the month's Certificate Fund charges
on the next Business Day following that 45th day. For those partners who are no
longer Eligible Group Members and are participating on a portable basis, we will
deduct the full monthly Certificate Fund charges on the first Business Day of
each Month.
WHEN MAY CHARGES CHANGE?
The Prospectus lists the maximum charges that Prudential may charge under the
KPMG Contract on pages 34 and 35. Under no circumstances will Prudential exceed
these charges. Within these maximums, Prudential may vary the amount or level of
charges. In general, Prudential will not change these amounts more often than
once a year, in which case you will receive information in the new Prospectus.
In some cases, Prudential may make changes more frequently, in which case you
will be notified.
WHAT ARE THE OTHER PRIMARY FEATURES OF THE PLAN?
The accompanying Prospectus contains considerable information about standard
features of GVUL applicable to the KPMG Contract, including the free-look
period, transfers, dollar cost averaging, loans, premium allocations, the right
to exchange for paid-up insurance, lapses, reinstatements, contestability, and
tax treatment of the benefits. Please refer to the Prospectus for information on
these and other features of the KMPG Contract. In addition, your Enrollment Kit
explains key features of your plan.
WHOM DO I CONTACT TO EFFECT A TRANSACTION?
You may contact the Prudential Customer Service Center at 1-800-562-9874 to
obtain the proper forms.
WHAT ARE MY CANCELLATION RIGHTS?
You may return your Certificate for a refund within 10 days after the date you
receive it. We describe this right as the free-look period on page 29 of the
Prospectus. Please read that section carefully for full details. During the
free-look period, your premium is deposited in the Fixed Account.
WHOM DO I CONTACT TO ANSWER MY OTHER QUESTIONS?
You may contact Prudential's Customer Service Center at 1-800-562-9874.
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